Crest Nicholson Regeneration Limited v Piers Henry Calvert & Ors

An option to be granted a further option to acquire land may itself confer an immediate equitable interest and fall within the perpetuity rules. Under the Perpetuities and Accumulations Act 2009, however, an option arising from an instrument taking effect after 6 April 2010 is not subject to the rule against perpetuities, even where a contingent interest arose earlier, provided the interest had not already become void. Whether an arrangement creates a lease or licence depends on its substance. Exclusive possession requires both physical control and an intention to possess; a right of occupation is relevant but is not identical to personal occupation. Lease terminology cannot convert a licence into a lease.

The claimant, a residential developer, sought declarations and specific performance concerning option arrangements over land owned by the defendants. The arrangements began with a 2002 agreement and were extended by agreements in 2006 and 2010. Crest exercised an option for a lease in September 2023. The defendants argued that the resulting option to acquire the freehold reversion was void under the 21-year rule in the Perpetuities and Accumulations Act 1964, and that the proposed lease was in substance only a licence.

The principal issues were when the relevant equitable interests arose, whether the 2009 Act applied to the 2023 lease option notice, and whether the lease/licence agreement conferred exclusive possession.

1. Immediate interest. An unconditional or conditional option may create an immediate equitable interest. An agreement to grant an option in the future may likewise be a disposition within section 9(2) of the Perpetuities and Accumulations Act 1964. The 2002 agreement therefore conferred an interest under the second freehold option in relation to the East and West Land. The 21-year period began on 25 September 2002. Interests in the Second and Third Properties arose only when those properties were added in 2006 and 2010, respectively, and were not retrospectively created in 2002 (paras 65–76).
2. Application of the 2009 Act. Exercise of the lease option by notice on 19 September 2023 created an equitable interest under the second freehold option. The notice was an instrument taking effect after the commencement day under section 15(1) of the Perpetuities and Accumulations Act 2009. Section 1(1) therefore applied, abolishing the rule against perpetuities for the option. The Act contained only the specific exclusions stated in section 15(1), and did not exclude instruments crystallising earlier contingent interests. This did not retrospectively validate an interest which had already become void. The wait-and-see rule meant that the relevant interest had not become void before the notice was served (paras 77–83).
3. Lease or licence. A lease requires exclusive possession, involving sufficient physical custody and control together with an intention to possess. Exclusive possession is not the same as personal occupation, but the right of occupation is relevant to physical control. The agreement expressly denied Crest any right to occupy or possess the land, left the Calverts in occupation, and granted Crest only limited access rights. Its substance was therefore an agreement for a licence, notwithstanding its lease terminology and the parties’ intention to obtain the benefit of section 9(1) of the 1964 Act (paras 89–113).
4. Pretence or sham. A sham or pretence requires a common intention that contractual terms should not operate according to their apparent effect, ordinarily involving dishonesty. A mutual mistake as to the legal effect of genuinely intended terms is different. The lease-like provisions were not a sham or pretence (paras 114–124).
5. The second freehold option remained valid and enforceable in relation to the remaining land. Further submissions were directed to the form of the agreements required to give effect to the judgment (paras 125–127).